Global Markets Tumble On Tough Love From Central Banks

The market is now coming to terms with the fact that the Federal Reserve will continue hiking interest rates despite the weakening economy and employment sector. Global equity markets continue to remain under pressure from global Central Banks and their monetary policy stance. The Federal Reserve has been in the spotlight since last week. However, it should be noted that other Central Banks are predicted to follow.

The Bank of England (BoE) is another very hawkish and adamant Central Bank looking to tackle the UK’s rising inflation rate. As the bank members stated, the UK’s inflation rate is predicted to increase to 13% by the end of winter. On the other hand, Citibank has advised that inflation may increase significantly, going higher than 13%. The BoE is predicted to increase interest rates like the European Central Bank.

NASDAQ And US Equities

It is important that traders pay attention to the NASDAQ as the price movement now looks very different compared to last Monday. The NASDAQ was the worst performing index out of the US major indices. The price of NASDAQ declined by 4.10% compared to the Dow Jones Industrial Average, which declined by 3.03%.

The NASDAQ has now formed a lower swing with one further bearish breakout. The price has declined below the support level of $12,806, which formed last week. Additionally, the price has experienced bearish crossovers on both moving averages and the stochastic oscillator. The Volume Weighted Average Price (VWAP) indicator also signals a further decline.

NASDAQ 4-hour price chart.

Most analysts predict that the price will remain under pressure as the support from earnings has now ended, and the economy is likely to come under pressure from a restrictive policy. Looking at the index's performance so far, we can see the price is almost 24% lower this year, but at the same time, the index is 11% higher than the yearly low.

Of course, the price of indices depends on the individual stocks compounded within the index. Currently, companies are announcing their dividend payment decisions. This may influence the demand for certain stocks and the overall index market. One of the latest companies to confirm their next dividend payment to shareholders is ExxonMobil (NYSE:XOM). Exxonmobil is part of the S&P 500.

The company has advised that the next payment is scheduled for Sept. 9, and investors will receive $0.88 per share they own. Therefore, the expected yield can reach 3.85% per annum, which is much higher than previous figures and one of the highest in the market. Potentially, this may support demand, but it is not certain whether the Fed’s restrictive policy will overshadow it.

The stock which saw the largest decline in NASDAQ was Nvidia (NASDAQ:NVDA), which declined by 9.23%. Only two stocks ended the day higher; Electronic Arts (NASDAQ:EA) and Workday (NASDAQ:WDAY). The largest decline within the Dow Jones was 3M Company (NYSE:MMM) which declined by 9.54% and the index saw no stocks end the day in the positive zone. We can see here indications of risk-off market sentiment.

DAX - Technical View

It should be noted that it is not only US indices that are currently pressured after the Fed’s speech on Friday. European Indices have also declined. The DAX has so far declined by 1% in today’s European Session and by 2.43% over the past week. 

One of the main factors is lower investor confidence as the European economy slows while inflation remains much higher than the ECB’s target of 2%. It is also predicted that the ECB will continue with its original plans to increase rates. Most economists believe the hike will be a further 0.50%.

DAX price chart.

In addition to this, the current energy crisis is worsening as gas imports will partially freeze from Wednesday until Saturday due to technical work on the turbine of the Nord Stream gas pipeline. Experts doubt that infrastructure repairs will last only a few days, considering the scenario of a complete blocking of Russian energy supplies, which would most likely push gas prices to new record levels.

Investors will mainly concentrate on the German Consumer Price Index (CPI), which will be released tomorrow, and economic estimates, which will be made public on Wednesday. This includes the estimates for the next CPI and GDP figures.